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Some Solution Proposals: Exploring Energy Resources in the Arctic Ocean

October 18, 2012

1. All stakeholders need to start a new international dialogue about the ‘math’ of offshore oil extraction in the Arctic.

To date, the business case for Arctic oil or gas has been made under assumptions abut world energy demand and a cost/risk assessment that have been disputed. Under the scrutiny of the general public, companies should transparently re-estimate the costs, risks and potential benefits of Arctic drilling.

This assessment has to include external costs and risks that are so far not under the liability of the firms, such as some of the risk to the Arctic ecosystem. Special attention has to be on the risk of a blowout. The past teaches that if drilling happens, an accident will happen sooner or later. Naturally, producing firms will have to be liable for the whole cost that may incur after a spill. Chances are high that under such a perspective, drilling in the Arctic is not economic anyway.

2. Arctic countries need to stipulate performance-based regulation and standards that fix the aim to be met instead of concrete implementations. At the same time, they have to re-examine the liability regime to make sure that companies bear the full costs of any incident.

Experience gained, for example, in the North Sea suggests that imposing specific technologies is very inflexible and poses too much responsibility on the regulator. In contrast, performance-based regulation uses the ingenuity of the companies by encouraging an environment where there is a competition to reduce risk by reducing the probability of an incident.

A key problem is finding suitable indicators that make companies invest in precautions instead of taking high risks and cleaning up after an accident has happened. At the moment, preparations taken by the hydrocarbons industry are not adequate.

Implementing performance-based regulation means that the operators need to develop processes and management systems that can ensure that the objectives of the regulations are met. It also ensures the industry is made fully responsible for its activities, combined with various means for applying adequate sanctions by the authorities.

3. Limit drilling to the least sensitive regions, where there is no ice or little enough ice so that effective ice management is possible.

A moratorium on the production of oil and gas in the whole Arctic Ocean will not be accepted by all states simultaneously. At the same time it seems clear that if there is drilling, there will be a mistake, as in every region of the world up to now. Whatever contingency plans there are, they will most probably not stand up to the challenges of a distant, cold, ice-infected, dark environment.

Furthermore, there is insufficient capacity to fight a spill in the Arctic – conventional measures will not work in the Arctic environment. Thus, since a complete moratorium seems to be unrealistic, limiting production to the most favourable places is the least that can be done.

4. Promote research and development on the technology to capture leaking methane

Methane leaking from the Arctic in the course of the melting of ice and permafrost poses a severe risk to the climate and, at the same time, represents a large-scale energy deposit that awaits tapping. At the moment, no technology is available to capture that leaking methane.

To advance this option from a theoretical utopia, research has to be done on such a technology – which would have the same advantages as gas from the Arctic Ocean in terms of distance and availability, but hopefully without the risk.

5. The Arctic Council should welcome the European Union as a member.

The EU is actually an Arctic entity, since three EU member states are in the Arctic Council. Since the EU has a culture of high standards in regulation of the environment, participation of the EU could lead to an infection of the Arctic Council’s policy with that culture of high standards.